Accounting assignment ( memo to the manager ) Example | Topics and Well Written Essays - 500 words

Accounting ( memo to the manager ) - Assignment Example The market it covers expands from Middle East to North Africa and all the way up to North America. The company has its offices in a number of countries including United Arab Emirates, Saudi Arabia, Lebanon, Egypt, Pakistan, Turkey,  China, USA, Canada and United Kingdom. Emaar has consistently maintained its financial position and stability. The numbers on the financial statement indicate a slight decline in revenue from 30th September 2007 to 30th September 2008 (1.62%). Although the revenue has declined slightly, the net profit has gone up by (0.4%). This indicates that the cost of revenues has gone down. From the company’s perspective, this shows that they have controlled on their costs. However, an interesting feature to note in the financial statements is that ‘selling, general and administrative expenses’ form a considerable portion of the overall expenditure both in 2007 and in 2008. Moreover, the ratio of selling and administrative expenses to the gross profit stands out to be (29.5%) and (29.1%) in 2007 and 2008 respectively. This indicates a very high proportion and is reducing the profitability considerably. In order to control these expenses, we first need to analyze the composition of these expenses. Selling, general and administrative is the sum of all direct and indirect selling expenses and all general and administrative expenses incurred by a company. Selling expenses are of two types, direct and indirect. Direct ones are those which can be linked with the sale of a specific unit. This would include warranty, advertisement or credit expenses. Indirect ones are those which cannot be allocated to a sale of a specific unit but is applied to all units in proportion. This would include telephone and postal charges. Whereas, general and administrative expenses include other expenses such as rent, heating, lighting and salaries of non-sales personnel (Investopedia). High SG&A expenses can be